Deck 8: Accounting for Merchandisingoperations in Hospitality

Question 1

Sales revenues are earned during the period cash is collected from the buyer.

Answer 1

True

Question 2

The primary source of revenue for a wholesaler is

A)investment income.
B)service fees.
C)the sale of merchandise.
D)the sale of fixed assets the company owns.

Answer 2

A

Question 3

The steps in the accounting cycle are different for a merchandiser than for a service enterprise.

Answer 3

True

Question 4

A perpetual inventory system would likely be used by a(n)

A)automobile dealership.
B)hardware store.
C)drugstore.
D)convenience store.

Question 5

For a merchandiser, all accounts that affect the determination of income are closed to the Income Summary account.

Question 6

A periodic inventory system requires a detailed inventory record of inventory items.

Question 7

Under a perpetual inventory system, acquisition of merchandise for resale is debited to the

A)Merchandise Inventory account.
B)Purchases account.
C)Supplies account.
D)Cost of Goods Sold account.

Question 8

An enterprise that sells goods to customers is known as a

A)proprietorship.
B)corporation.
C)retailer.
D)service firm.

Question 9

Which of the following expressions is incorrect?

A)Gross profit - operating expenses = net income
B)Sales - cost of goods sold - operating expenses = net income
C)Net income + operating expenses = gross profit
D)Operating expenses - cost of goods sold = gross profit

Question 10

Which of the following would be considered a service firm?

A)Clothing store
B)Wholesaler
C)Restaurant
D)Car dealership

Question 11

A merchandiser that sells directly to consumers is a

A)retailer.
B)wholesaler.
C)broker.
D)service enterprise.

Question 12

In a perpetual inventory system, cost of goods sold is recorded

A)on a daily basis.
B)on a monthly basis.
C)on an annual basis.
D)with each sale.

Question 13

Retailers and wholesalers are both considered merchandisers.

Question 14

A merchandiser has different types of adjusting entries than a service company.

Question 15

The journal entry to record a return of merchandise purchased on account under a perpetual inventory system would credit

A)Accounts Payable.
B)Purchase Returns and Allowances.
C)Sales.
D)Merchandise Inventory.

Question 16

The revenue recognition principle applies to merchandisers by recognizing sales revenues when they are earned.

Question 17

Which of the following is a true statement about inventory systems?

A)Periodic inventory systems require more detailed inventory records.
B)Perpetual inventory systems require more detailed inventory records.
C)A periodic system requires cost of goods sold be determined after each sale.
D)A perpetual system determines cost of goods sold only at the end of the accounting period.

Question 18

If a company determines cost of goods sold each time a sale occurs, it

A)must have a computer accounting system.
B)uses a combination of the perpetual and periodic inventory systems.
C)uses a periodic inventory system.
D)uses a perpetual inventory system.

Question 19

To grant a customer a sales return, the seller credits Sales Returns and Allowances.

Question 20

Under a perpetual inventory system, the cost of goods sold is determined each time a sale occurs.

Question 21

When goods are returned that relate to a prior cash sale,

A)the Sales Returns and Allowances account should not be used.
B)the Cash account will be credited.
C)Sales Returns and Allowances will be credited.
D)Accounts Receivable will be credited.

Question 22

Sofia's Sodas purchased merchandise inventory with an invoice price of $2,000 and credit terms of 2/10, n/30.What is the net cost of the goods if Sofia's Sodas pays within the discount period?

A)$2,000
B)$1,960
C)$2,600
D)$1,600

Question 23

The freight cost incurred by a seller to deliver goods sold to a customer is called ________________.

Question 24

Happy's Hot Dogs sells merchandise on account for $3,000 to Karen's Catering with credit terms of 2/10, n/30.Karen's Catering returns $500 of merchandise that was damaged, along with a check to settle the account within the discount period.What is the amount of the check?

A)$2,940.
B)$2,950.
C)$2,500.
D)$2,450.

Question 25

The journal entry to record a credit sale is

A) Cash
$\quad$ $\quad$ Sales

B) Cash
$\quad$ $\quad$ Service Revenue

C) Accounts Receivable
$\quad$ $\quad$ Service Revenue

D) Accounts Receivable
$\quad$ $\quad$ Sales

Question 26

A Sales Returns and Allowances account is not debited if a customer

A)returns defective merchandise.
B)receives a credit for merchandise of inferior quality.
C)utilizes a prompt payment incentive.
D)returns goods that are not in accordance with specifications.

Question 27

If a purchaser using a perpetual system agrees to freight terms of FOB shipping point, then the

A)Merchandise Inventory account will be increased.
B)Merchandise Inventory account will not be affected.
C)seller will bear the freight cost.
D)carrier will bear the freight cost.

Question 28

In preparing closing entries for a merchandiser, the Income Summary account will be credited for the balance of

A)sales.
B)merchandise inventory.
C)sales discounts.
D)freight-out.

Question 29

Cost of goods sold is deducted from net sales revenue for the period in order to arrive at ________________.

Question 30

Which of the following would not be classified as a contra account?

A)Sales
B)Sales Returns and Allowances
C)Accumulated Depreciation
D)Sales Discounts

Question 31

The respective normal account balances of Sales, Sales Returns and Allowances, and Sales Discounts are

A)credit, credit, credit.
B)debit, credit, debit.
C)credit, debit, debit.
D)credit, debit, credit.

Question 32

The operating cycle of a merchandiser is

A)always one year in length.
B)generally longer than it is for a service company.
C)about the same as for a service company.
D)generally shorter than it is for a service company.

Question 33

On December 1, 2008, ABC Linens sold merchandise which costs $400 on account to the Green Hotel Co.for $600 with terms of 3/10, n/30.ABC Linens uses a perpetual inventory system.The journal entry to record this transaction on ABC Linens' books will include:

A)a debit to Cost of Goods Sold for $600.
B)a debit to Sales Discounts for $18.
C)a credit to Sales Revenue for $200.
D)a credit to Merchandise Inventory for $400.

Question 34

As an incentive for customers to pay their accounts promptly, a business may offer its customers

A)a sales discount.
B)free delivery.
C)a sales allowance.
D)a sales return.

Question 35

The Sales Returns and Allowances account is classified as a(n)

A)asset account.
B)contra asset account.
C)expense account.
D)contra revenue account.

Question 36

A buyer would record a payment within the discount period under a perpetual inventory system by crediting

A)Accounts Payable.
B)Merchandise Inventory.
C)Purchase Discounts.
D)Sales Discounts.

Question 37

Which of the following accounts has a normal credit balance?

A)Sales Returns and Allowances
B)Sales Discounts
C)Sales
D)Selling Expense

Question 38

Tom's Steakhouse Company uses a perpetual inventory system.Meyer purchased inventory on account for $1,000.The credit terms are 2/10, n/60.The purchase will be recorded with the following journal entry:

A)debit Merchandise Inventory, $1,000; credit Accounts Payable, $1,000.
B)debit Purchases, $1,000; credit Accounts Payable, $1,000.
C)debit Merchandise Inventory, $980; credit Accounts Payable, $980.
D)debit Cost of Goods Sold, $1,020; credit Merchandise Inventory, $1,020.

Question 39

When a customer returns merchandise purchased on credit, the retailer debits

A)Sales and credits Accounts Receivable.
B)Sales Returns and Allowances and credits Accounts Receivable.
C)Accounts Receivable and credits a contra-revenue account.
D)Cash and credits Sales Returns and Allowances.

Question 40

Sales revenues are usually considered earned when

A)cash is received from credit sales.
B)an order is received.
C)goods have been transferred from the seller to the buyer.
D)adjusting entries are made.

Question 41

Sales Returns and Allowances and Sales Discounts are both ______________ accounts and have _______________ normal balances.

Question 42

Every sales transaction should be supported by a _________________ that provides written evidence of the sale.

Question 43

When a customer returns merchandise previously purchased on credit, the entry to record the return requires a debit to the ________________ account and a credit to the ________________ account.